Mutli-Level Marketing Q&A

Ding Dong, Avon Calling! If you are from my generation, you grew up hearing this on television and would get excited at the prospect of the Avon lady calling to see your mother. For generations, many housewives have made extra spending money selling Avon, an early version of Multi-Level Marketing. While the Avon brand is still strong, and still making many women some extra spending money, there are many other brands using MLM and social media has given them a great forum to promote their products and the MLM method of selling.

Before you decide if Multi-Level Marketing is a good way for you to earn money and if it is a way for you to become financially independent, you must carefully consider the pros and cons.

What is Multi-Level Marketing (aka MLM)?

Also called network marketing, and sometimes pyramid marketing or selling.

Where a business sells its products using freelance salespeople, with earnings made in a pyramid shaped commission system with the individual end salespersons commissions counting toward her managers commissions, which count toward her managers commission and on up to the overall manager getting a piece of all the pies.

What are the differences between Multi-Level Marketing and Pyramid Schemes?

While you need to look at the terms and conditions before starting any multi-level marketing program, most are legitimate and offer a chance to make money if you put in the work, as (at a minimum) you will be in control of the sales that you make yourself and have the potential to make additional money from the sale of those working ‘under you’. An illegal “pyramid scheme” is based on money put in by you and getting money put in by those you recruit; often of the premise of an investment. With pyramid schemes often being scams, with no actual investment being made and the funds taken by those higher up on the pyramid, causing it to ‘collapse’; with nothing left for those below, who lose the money put in.

Some Multi-Level Marketing programs have been deemed to be pyramid schemes, and ordered to close down or change their methods, because they required a large sum of money to participate or made promises to its salespeople that were not feasible. It’s important to carefully research the company before you join a multi-level marketing program to ensure that the profit making structure is stable and your potential to earn is sufficient.

Why is Multi-Level Marketing Different to Other Marketing/Sales Methods?

Commissions are made from your own sales, as well as from the sales of others you have recruited.

As well as selling your own products, you also must encourage others to sign up as sales representatives, sometimes called distributors, to work under you

Selling is often via referrals and word of mouth, so salespeople are often very focused on building their networks; with social media now being a very popular way of promoting the products. This is a benefit for some and has brought this method of selling more in the mainstream.

In most cases the brands are known and you have access to their corporate marketing materials.

Training is also provided, but usually at a cost to you. The training is often focused on empowerment and sales skills, in order to benefit the individuals and the company overall, so some find it life changing.

As well as the team aspect, there is often a strong community around the brand with events, incentives and prizes to compel strong performance.

Due to the commission structure, there is a team aspect, which appeals to many people — especially if they are working from home or working for themselves.

Overheads are fairly low. You work from home, you don’t normally don’t need to pay to keep stock.

What are the costs associated with Multi-Level Marketing?

There is usually a requirement to pay an initial fee that may or may not cover the cost of training, marketing materials, etc.; this is sometimes an annual fee.

How Successful is Multi-Level Marketing?

While a few people are very successful, building large teams that they get commissions from, earning thousands of dollars a month; a study by the Federal Trade Commission shows that 99% of participants lose money. A review of studies of various MLM brands in a number of countries show that 10% or less of the participants in Multi-Level Marketing make a profit.

Some countries, like China, ban or have restrictions on Multi-Level Marketing because of the fact that many feel that the representation of the great profits to be made is misleading.

Multi-Level Marketing, Financial Independence & Its Appeal to Women

Most Multi-Level Marketing Programs use the incentive of gaining financial independence to recruit women into their programs.

Many of the brands using MLM are those that would be attractive to women; i.e. cosmetics, weight loss, cleaning and household products, toys, etc.

Other things to keep in mind before starting in Multi-Level Marketing

You will be working as an independent salesperson, so in most cases you are responsible for saving money toward paying income taxes. You will not get the benefits that an employee would – health insurance, vacation pay, retirement fund, etc. Some of the bigger MLM companies may have opportunities for you to buy into group schemes for these. You are not protected under employment laws.

In most cases you must deal with returns and complaints from your customers, as you are the sole point of contact; so you must be confident in the quality of the products and the reliability of the company to deliver as promised.

What will you do if the company closes down, or changes it’s structure? One morning, a couple of years ago, the talk radio shows in Ireland were flooded with calls from Avon representatives. They had each received a pre-recorded call from Avon Ireland that, with immediate effect, Avon would no longer be in business in Ireland. It gave no further information, explanation, or apology. Some of these women had been selling Avon for decades and felt like they had lost a family member.

Why do many people have a negative opinion of Multi-Level Marketing?

While some of the brands are popular and have been around for years; some people have a negative opinion of MLM because they:

confuse MLM with Pyramid Schemes (see above);

feel that products sold via MLM are lesser quality at higher prices;

find the sales techniques uncomfortable, because it’s people you know and it’s hard to say ‘no’;

are being approached and sold to, rather than choosing to go into a shop where you are able to compare a range of products;

have been aggressively recruited by a friend or acquaintance looking to make additional commissions;

have been “shunned” by friends in their network for not performing or for leaving.

Is the perception of Multi-Level Marketing Changing?

While there are many more brands using Multi-Level Marketing to sell, and social media has brought many to the mainstream; there are also many more people selling with this method, which dilutes the possibility for each to make a good profit.

The past recession was also a boom for Multi-Level Marketing with many people losing their jobs and seeing this as a good way to get started with their own businesses.

Many of the Trump administration’s policies to give businesses more freedom benefits this type of business, where Obama’s administration was looking to set more controls.

Insights from an Experienced Multi-Level Marketer

Renee Solari is an experienced saleswoman with a career in real estate. She has also sold for a few different multi-level marketing brands in the past, and now represents Thirty-One Gifts, “the brands are not all created equal. I know a number of women that have made a lot of money in this area and they are usually putting 70 hours a week on this. They never give up. Never take no for answer. If they applied their selling skills to anything, they would do well — and probably make more money” She adds, “some women get involved because they love the team aspect. You can’t do it if you don’t love it. There is often an empowerment component for women. It can change lives.”

If you are considering starting with a Multi-Level Marketing brand, it’s important to thoroughly research and objectively consider:

the pros and cons of the brand, the company, the people involved;

the commission structure and how many of those on your level are making the profits that you have been told to expect;

the costs and your ability to take on any financial implications;

your own abilities as a sales person and as someone that can recruit and motivate others;

the pros and cons of being self employed;

if this business proposal better than any other prospective MLM or non-MLM business proposals available to you.

The saying goes, “If it looks too good to be true, it probably is too good to be true!”

As with any new business initiative, do not expect to “get rich quick”; but set realistic goals, have patience and be prepared to put in the time, work hard, have some failures, learn from them and grow a successful business.

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